Bilkins Financial Advisors provides accounting and finance assistance to customers in the retail business.Bilkins has four professionals on staff,plus an office with six clerical staff.Total compensation,including benefits,for the professional staff runs up to $800,000 per year,and it normally has about 3,200 billable hours per year.Professional staff keeps detailed time sheets organized by client number.The total office and administrative costs for the year is $240,000. Bilkins allocates professional time and office and administrative costs to clients monthly,using allocation rates based on billable hours.During July,Bilkins' professionals spent 50 hours on their client,Soupy Sales.Bilkins adds a 30% markup on their costs to calculate the amount billed to the customer.How much gross profit did Bilkins earn from Soupy Sales in July?

Question

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The cost per billable hour is calculated by dividing the total compensation of the professional staff ($800,000) by the total billable hours (3,200), resulting in $250 per hour. The office and administrative costs per hour are $240,000 divided by 3,200, which is $75 per hour. The total cost per hour is $325 ($250 + $75). For 50 hours, the total cost is $16,250. With a 30% markup, the billed amount is $21,125. The gross profit is the billed amount minus the cost, which is $4,875 ($21,125 - $16,250).

Bilkins Financial Advisors Provides Accounting and Finance Assistance to Customers